I am a CPA in Texas with an MBA from the University of Chicago. I have seen a lot and made many mistakes. Hopefully by now I will have learned something from them. Just as importantly, you may learn something from my mistakes. You can e-mail me by clicking on my "View my complete profile".

Tuesday, March 3, 2009

See No Evil, Speak ...

"Numerous accounting firms missed the alleged fraud at Bernard L. Madoff Investment Securities LLC as they inspected the investment company's books or those of so-called feeder funds that helped steer money to it. As a result, those accountants could now be legally vulnerable to claims that they should have uncovered red flags, according to legal and accounting experts. ... Lynn E. Turner, former chief accountant for the [SEC], said he finds it hard to believe that auditors of so-called feeder funds checked out Madoff's auditor as a way of bullet-proofing their confidence. 'If they didn't,' he said, 'then investors will have to hold the auditor accountable.' ... Others say they had no obligation to check out Mr. Madoff's auditor. They contend their primary role is to make sure the numbers their clients supply add up, not to detect fraud. ... Friehling & Horowitz [F&H] wasn't registered with the [PCAOB]. Nor was it 'peer reviewed,' a system in which auditors check out one another for quality control. David Friehling, the firm's only active accountant, was enrolled in a peer-review program at the [AICPA], but wasn't required to participate because he didn't handle audits, according to the AICPA. ... 'Our audit conformed to all professional standards,' said KPMG spokeswoman Kathleen Fitzgerald. "This is not a KPMG issue,' she said, noting that lawsuits have been filed against many top auditing firms. ... ''PWC was not the auditor for Bernard Madoff Investments, where the alleged fraud occurred,' the Canadian [PWC] affiliate said in a statement. Fairfield [Greenwich Group] is also a defendant in the suit", my emphasis, Ianthe Dugan and David Crawford at the WSJ, 18 February 2009.

Someone is going to have to take responsibility for this (I vote SEC, let the firms continue acting like morons if the regulatory body in charge of the whole shebang can't even handle it why should the organizations beneath its regulation be held to such a standard? - not to negate any irresponsibility on the part of the auditors...)

SOX 2.0 we cannot have.

Something better must come of this. Otherwise my poor kids are screwed... as are we all...